Rs 8,500 cr property tax sword hangs over 4,000 city buildings

BMC has issued notices to owners to pay their tax by March 31 or risk auction; however, many residents are shocked as they are unaware of tax arrears on their property left behind by errant builders

Owning a piece of real estate in the city, especially with so little of it available and that too at exorbitant prices, is everyone's ultimate fantasy. But unless you read the fine print carefully during the transaction, it's likely that BMC will burst your bubble, with a hammer.

Taxing times: A notice has been pasted on the walls of Anand Seva
Samiti, Oshiwara, asking the residents to pay up over Rs 15 lakh towards
property taxes. Pic/Nimesh Dave

The civic body has already issued notices to residents to pay up property tax by March 31, 2012. Those who have outstanding amounts against their names may see their real estate auctioned of by the civic body. The problem remains that many current occupants are often unaware of tax due on their property from the past as the developer isn't always forthcoming on sharing the whole picture.

Flat broke!
MiD DAY had reported about Dheeraj Heritage in Santacruz, which has around 380 shopping units, and owes over Rs 7 crore to BMC towards property tax payment, a fact which was not known to shop owners till the civic agency put up a notice of auction on their building last week.

Money matters: Dheeraj Heritage in Santacruz owes over Rs 7 crore
to BMC in property tax payment

A similar notice has been pasted on the walls of Anand Seva Samiti, Oshiwara, where residents have been asked to pay the corporation over Rs 15 lakh towards property taxes. Bapu Romane, president, Anand Seva Samiti, said the builder took over their land, shifted them as part of a slum rehabilitation authority (SRA) project, and constructed a ground plus seven floor commercial complex known as Reliable Business Centre at the original plot.

The residents of Anand Seva Samiti, Oshiwara, have been instructed to
pay over Rs 15 lakh towards the same.
Pic/Nimesh Dave

"We took possession of our flats in July 11, 2008, but were never told by anybody about our property tax dues. We were shocked recently after the auction notice was put up." Romane added when the residents approached the local ward office, they were told to clear the entire dues or face action. The ward office also showed them the copy of a bounced cheque of Rs 5 lakh issued on their behalf by the builder towards property tax. The ward office has added the interest on the defaulted payments too.

"We are scared. Where will we go? How can we shell out such a huge sum in such a short time? The builder has cheated us," said Romane. Anuj Puri, chairman and country head of Jones Lang LaSalle India, said, "Usually if there is property tax due prior to the acquisition of the buyer, it is the responsibility of the developer to clear all the dues and the buyers do not pay retrospectively. Otherwise, the residents can take the developer to the court, but will have to pay the property tax to avoid any auction-like situation."

President of Stamp Duty and Registration Payers Association Vinod Sampat said, "The municipal authorities are the real culprits as they do not take action to recover dues prior to granting permission for reconstruction or construction of a building. The building proposal department should make sure the developer submits no-due certificates and non-agricultural tax receipts etc before sanctioning a building plan or project."

"The quantum of deposit being collected by municipal authorities should be increased so that the builder is forced to comply with his statutory obligation of obtaining occupation certificate, which many developers do not even several years after completion of the project.

There have been instances in the past where builders have 'managed' government officials and succeeded in carrying out unauthorised construction. This practice can only be stopped if lien is taken, restricting builders to sell 10 per cent of the constructed area till conveyance is executed in favour of legal entity," Sampat added.

Pankaj Kapoor, founder and managing director at Liases Foras Real Estate Rating & Research Pvt Ltd, said, "I would blame both the developer and the occupants of the apartments for non-payment of property tax. The issue is the same at many societies in the city, and the customer is always at the receiving end as he is unaware of the due amount until and unless the entire building is occupied. The residents then go for registering the society, but by then it is too late. Also, in many housing societies the occupants of the flats do not clear the monthly society maintenance, which leaves a minimal fund with the society to clear various dues like property tax, water tax, electricity and lift bill etc, which keep piling up."
Bidding time
Out of 3.25 lakh recognised properties in the city, 4,172 are under BMC's lens for payment defaults by the owners. These persons have been issued auction-notice, wherein the owners would have to pay the outstanding tax along with the penalty. Otherwise the civic body would recover the auction charges too from them. "Many owners are defaulters and despite giving them bills, notices, warnings on time, people don't pay up. Even if they turn up to fork out the outstanding five minutes before the auction, we would accept it. But they have to produce the entire amount in cash or through demand draft," informed an official from the BMC's assessment and collection department.

If a person doesn't pay up the outstanding amount, 45 days is the legal period he/she gets before BMC verifies the ownership of the property prior to auctioning it. According to the corporation, Rs 8,531.30 crore have been recorded as outstanding property tax payments till March 2012. While bills worth Rs 3,742.63 crore were issued in the last fiscal year, Rs 2,992.24 crore have been collected by the civic body till date. Those who haven't paid their property taxes have only today and tomorrow to comply.

"We have also extended our collection timings on the 30th till 9:30 pm and on the 31st till 12 am at all ward offices. Also, online payment is available to citizens. They should pay their bills," informed another official. In 2011 till March 28, BMC had collected Rs 2,384.70 crore through property taxes. The civic agency wants all dues cleared before implementing the new system of taxation -based on capital value - with retrospective effect from April 1, 2010.

What can owners do?
Advocate Vinod Sampat has advised that the buyers/residents have no option but to clear the dues, and file a criminal and civil case against the developer with the police and if the local police fails to act on the complaint, then a private complaint can be lodged with the magistrate court.

Did you know?
Earlier, property tax was calculated on the basis of the rent paid by tenants. Rents for old buildings in South Mumbai were frozen at amounts that existed in the 1940s. The municipal body could not up this amount. Now, the new property tax structure devised by the BMC will be based on the current market value of the real estate. Property tax will now be calculated on five factors: the price of property, its area, age of the building, whether it is a commercial or residential property and type of construction -- concrete or wooden structure. BMC is currently sending provisional property tax bills calculated on the capital value, and the amount will be adjusted when the new system is implemented. Though the civic general body approved the new capital value-based taxation system on January 27, 2010 and it was supposed to come into retrospective effect from April 1, 2010, it has not been implemented yet. Presently the civic body recovers property tax on a half-yearly basis. Since the new system is yet to get a final approval, it has issued bills based on the old system. Property tax is BMC's second largest source of income after octroi collection. This year, BMC is expected to get annual revenue of about Rs 3,600 crore from property tax. Based on the new system, those living in the island city will have to pay twice the property tax they currently pay, while those in the suburbs will end up paying less by 15-20% of what they pay now.

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